A Philanthropic Empire? Well, Yes

Buffett-gates Alliance Praiseworthy, But It Raises Questions

June 27, 2006|By DAN HAAR

What happens when the most successful corporate investor in history gives the bulk of his fortune to the most successful industrial monopolist of his era, and the pair -- the world's two richest humans -- set out to improve world health and education?

Lots of people get healthier and more educated around the globe, presumably.

Far beyond that, Warren Buffett's pledge to donate an amount that will probably top $30 billion to the Bill and Melinda Gates Foundation -- which is now worth $29 billion -- has far-reaching consequences. Most of it is for the good, and philanthropy people were smiling Monday.

Overnight, it not only doubles what was already the largest private foundation; it also becomes the shining example of a trend: Foundations are working with each other much more than they were just a few years ago.

``We're all trying to clump together because, let's face it, at the end of the day we're all penny capitalists, compared to the size of the problems we address,'' said David Nee, executive director of the William Caspar Graustein Memorial Fund in Hamden, which is devoted to improving education, especially for young children.

The Graustein Fund, for example, jump-started an early childhood initiative in New Britain that has drawn in three other charitable funds, including the United Way. It's not just money on the table, it's also expertise -- they are all working together.

But how about the cash itself? Buffett and Gates, penny capitalists. Hmmm. Compared with global communicable diseases, perhaps they are. Still, their joint effort raises sticky questions about philanthropy, and about money in general. Sixty-billion-dollar pools in the sole hands of three people tend to do that.

Is the Gates Foundation suddenly too large to be effective, in the same way that Pfizer Inc. made itself too large to innovate, with the acquisition of Pharmacia three years ago? Consider: The goliath foundation is suddenly five times larger than the second-largest philanthropic fund, the Ford Foundation. It will give away $3 billion a year -- more than the regular budget of the United Nations World Health Organization.

By comparison, Connecticut was home to 1,369 private foundations in 2003, the last year for which we have a hard count. Together, they gave away $515 million that year, said Nancy Roberts, executive director of the Connecticut Council for Philanthropy.

Roberts likes to say that the Connecticut total would run the state government for all of 12 days. So, naturally, she and others in the donation world took the view Monday that more is better when it comes to good causes. Consolidation, for now, is not a concern the way it is in many industries -- starting with computer operating software.

``There are many foundations being formed each year,'' Roberts said -- including upwards of 100 new ones annually in Connecticut alone. Since about half of the Connecticut-based private funds give away less than $25,000 a year, if anything the problem is that they are too spread out.

Too spread out, for now. Nationwide, all non-corporate foundations combined gave away $33 billion last year, and the Gates total will approach 10 percent of that. Gates and Buffett said in a public ceremony in New York Monday that Buffett expects his donations to be disbursed in the year when he gives them -- starting with $1.5 billion this year.

Also at issue -- not necessarily a problem, for now -- is the matter that one foundation can set the global agenda in its fields, for better or worse.

``It will be interesting,'' said Nee, at the Graustein Foundation. ``Foundations that used to be leveragers have become leveragees.''

Leveragees, meaning their money helps the cause, but doesn't call the shots.

There were fears 100 years ago when the great foundations -- Carnegie and Rockefeller, chiefly -- first opened for business, with more or greater clout than Gates and Buffett enjoy today. But Roberts, Nee and others in the industry were clear Monday: The fears were not justified.

``The beauty of American philanthropy is that it is so diverse,'' said Jane Polin, a New York-based philanthropic adviser. ``This is a historic moment. They're both global figures, and so this is going to cause other leaders in industry in other fields to look at what's been done.''

Among the lessons, Polin said, is that philanthropists don't have to go it alone, and that ``making money is different from being a philanthropist.''

In yet another way the Buffett donation illustrates a trend: Big donors are more likely to kick in money before they die, as the 75-year-old Buffett decided to do, than give a bequest. Linda J. Kelly, president of the Hartford Foundation for Public Giving, the state's largest private foundation, said she is seeing that trend clearly, as donors want to take an active role in their causes.

From the standpoint of those causes, it is all for the good, indeed. If, as Bill Gates said Monday, the fund can lead to cures for the world's 20 top diseases, then who could complain?

Still, when the world's biggest pots of money come together, even for charity, one can't help but wonder what all this size might eventually mean. After all, this marriage, this mega-foundation, is the product of a brand of capitalism that glorifies centralized control, for better or worse.